A Foreign Trade Zone( FTZ) is a designated area which, for customs purposes, is considered outside the United States. Businesses located in an FTZ can import merchandise without a foreign customs entry and without paying customs duties or government excise taxes. If the final destination of the product is the U.S., the business will incur customs duty and excise taxes only at the time of transfer from the FTZ into the United States.

On the export side, businesses are exempt from United States customs duty or tax. Please check for details requirements and benefits of a Foreign Trade Zone.

FTZ offers importers and distributors significant customs free, duty-free, duty deferral inventory tax incentives and inverted tariffs. Encompassing over 2,600 acres in California’s Central Valley, Merced County is one of the largest Foreign Trade Zones in the continental United States because of:

Location—Close proximity to distribution centers, major freeways, and rail lines.
Workforce—Availability of a talented, hard-working labor pool.
Real Estate Value—Much lower cost for commercial and residential properties than in such areas as San Francisco and Los Angeles.
Quality of Life—Mild climate, low congestion, close to recreational and cultural opportunities.

Manufacturing and processing companies have the potential to realize big savings through inverted tariffs. Distribution firms can dramatically cut merchandize processing fees.

In fact, nearly 2,500 companies, from small businesses with 15 employees to major corporations like AT&T, are taking advantage of the benefits of Foreign Trade Zones.

A cost-analysis assessment will help you determing if a Foreign Trade Zone is right for your firm and determine your level of saving. Also, download this Foreign Trade Zone fact sheet.

If so, a United States Foreign-Trade Zone (FTZ) may help you to:

• Significantly reduce customs entry fees.
• Lower operating costs.
• Streamline operations and speed the supply chain.
• Keep your United States based operations competitive with foreign based firms.

Re-exports: Merchandise which is imported into the U.S. for admission into a FTZ and later re-exported from the Zone is never assessed any customs duties.

Reject, Scrap, and “Consumed” Merchandise: Imported merchandise, which is admitted into a Zone and then rejected, scrapped, or consumed in the Zone, is not assessed any customs duties whatsoever. Duties are reduced significantly for all merchandise which is scrapped through a manufacturing operation in a FTZ and then sold from the Zone as commercial scrap materials.

Zone-to-Zone Transfers: Imported merchandise which is admitted into a Zone and then shipped to another U.S.FTZ can be shipped duty-free to the receiving Zone with the receiving Zone’s concurrence. As duty-free transfers, Zone to Zone shipments allow both the shipping Zone and the receiving Zone to reduce their duty exposure. Duties are eliminated completely on imported components which are transshipped through several Zones and eventually re-exported.

Duty Deferral: While duties are eventually assessed on imported merchandise shipped to U.S. locations from FTZ, these duties are deferred while the merchandise remains in the Zone. The time that duty is paid is moved from the date of importation to the date of shipment from the Zone. The cost-of-money savings on duty deferral can be significant for large-volume distributors or operations with long inventory turnover periods.

Inverted Tariffs: When components are imported and admitted into a FTZ, they can be manufactured into a new product for re-export or sale in the U.S. In these cases, the importer may elect to apply the finished product duty rate or the component duty rate, whichever is lower. When the finished product rate is lower than the imported component rate, the importer can save the difference between the two rates.

Inventory Taxes: In states that assess taxes on business inventories, all imported merchandise, and even domestic merchandise when held for export, can be stored in a FTZ without having to pay business inventory taxes.

Merchandise Processing Fee: Customs assesses a “Merchandise Processing Fee” (MPF) per entry which is calculated as 0.21% (.0021) of the full declared value of the merchandise, up to a maximum of $485. FTZ are only required to submit one entry per week for all shipments from the Zone, thus ensuring a maximum MPF of only $485 per week, reducing MPF costs to importers who currently file several entries per week and pay more than $485 total per week for all entries.